There's a trend forming in the health care marketplace, where consumers are applying for so-called "gap" insurance plans, as opposed to longer-term coverage that would meet the Affordable Care Act's requirements, a recent New York Times article reports.
While it's worth noting that the relevant data is scarce--many insurers don't disclose their particular sales, for instance--several online brokers, including GoHealth and eHealth, are reporting an uptick in the number of applicants for short-term plans since 2014. EHealth alone clocked 140,000, which is double the number it had last year.
You should think long and hard about the pros and cons of gap plans, well before you (or your employees) elect to apply. Here's a breakdown of the good, the bad, and the ugly of these policies:
1. They're limited in what they will cover, and for how long.
There's a reason short-term plans don't qualify under the Affordable Care Act (and why you'll still have to pay a penalty for lack of coverage): Such policies tend to only cover major health crises. What's more, they're only available for one-month windows, for up to a maximum of one year, or as little as three months.
2. You can be denied them based on your health history.
If you elect to apply for short-term health coverage, it's feasible that you could be denied. The policies tend to require medical underwriting. EHealth reported that 12 percent of its applicants were denied last year alone, for instance, and predominately for medical reasons.
Long-term coverage plans that qualify under the Affordable Care Act, by contrast, cannot deny you coverage based on your medical history.
3. They tend to have lower premiums (but there's a catch).
Gap coverage plans are generally cheaper than other options. The average price on eHealth, for instance, was $110 in 2014.
The caveat? They come with few benefits, and the deductibles are frequently pricey. The average amount of money that a gap user paid out of pocket on eHealth was $3,589.
4. They're attracting millennials.
With all of the potential downsides to short-term health coverage, the policies are attractive to a few key groups.
People who failed to apply for coverage during the Affordable Care Act's enrollment period, for instance, often go for gap coverage if they decide they want some form of health insurance after all, as do individuals who don't qualify for the law's premium subsidy or Medicaid. EHealth finds that a majority of its short-term applicants were between the ages of 18 and 34.
5. They often don't cover maternity leave.
It's also worth noting that gap policies often won't account for maternity leave if you or your spouse becomes pregnant. They also might not cover prescription drugs.
For more on why Americans might be turning more towards short-term coverage, head over to the New York Times.